Bentley Systems, Incorporated (BSY) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong revenue growth projections, particularly in subscription and service revenues. The focus on AI and digital twins is promising, with potential for ARR growth and geographic expansion. The Q&A reveals positive sentiment towards AI initiatives and infrastructure cloud adoption. However, some concerns about data usage and management's lack of clarity on certain metrics exist. Overall, the strategic focus on AI, strong financial outlook, and positive analyst sentiment suggest a positive stock movement, but not strong due to minor uncertainties.
Key Financial Performance
Total revenues for Q1 2026 $424 million, growing 14.5% year-over-year and 11.9% in constant currency. Growth driven by subscription revenues, which represent 93% of total revenues and grew 14.7%.
ARR (Annual Recurring Revenue) $1.495 billion at quarter end spot rates, with year-over-year growth of 11.5% in constant currency. Sequential quarterly growth rate was 2.5%, all organic.
Net revenue retention rate 109%, consistent with previous quarters, highlighting stability and growth within existing accounts.
Free cash flow for Q1 2026 $188 million, reflecting timing benefits from 2025 and weighted operating expenses towards the first half of 2026. On a last 12 months basis, free cash flow was $492 million, up 13% year-over-year.
Adjusted operating income less operating stock-based compensation (AOI less operating SBC) $141 million for Q1 2026, with a margin of 33.2%, in line with expectations.
Recurring revenues (Last 12 months) $1.440 billion, increased by 13.3% year-over-year or 11.5% in constant currency, representing 93% of total revenues.
Perpetual license revenues Decreased 18% in constant currency, reflecting a small and less predictable revenue stream.
Service revenues Increased 25.8% in constant currency, driven by reacceleration in Maximo-related services from the cohesive business.
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Operating Highlights
AI advancements: Bentley Systems is leveraging AI to enhance infrastructure engineering. Their Asset Analytics, driven by AI, has exceeded $50 million in annual revenue run rate. They are also developing APIs and MCP servers to enable AI-driven workflows, such as optimizing structural designs at machine speed.
Bentley Open Applications: The company has released an MCP server for STAAD, enabling AI agents to optimize structural designs. They plan to instrument other key applications and validate the commercial model for this usage pattern.
Geographic expansion: Strong growth in EMEA, particularly in the UK and Africa, driven by infrastructure investments and mining. Latin America also showed strong performance, especially in transportation and mining.
Sector expansion: Resources sector has become the second-largest sector, accounting for over 20% of ARR. Growth driven by Seequent's applications in mining, geothermal energy, and groundwater management.
ARR growth: Year-over-year ARR growth for Q1 was 11.5%, with a net revenue retention rate of 109%. New logos contributed 300 basis points of ARR growth, primarily within the SMB segment.
Subscription revenues: Subscription revenues grew 14.7% year-over-year, representing 93% of total revenues.
AI-driven transformation: Bentley Systems is focusing on AI to transform infrastructure engineering, enabling fixed pricing models and improving productivity for design firms.
Event strategy: The company is decoupling its Year in Infrastructure Awards from its User Conference to create two distinct events, enhancing focus and engagement.
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Risk or Challenges
Geopolitical Tensions: Geopolitical tensions, particularly with Chinese state-owned entities, inhibit accessibility to the Chinese market, which accounts for 25% of global design billings. This limits growth opportunities in a significant market.
Conflict in the Middle East: The ongoing conflict in the Middle East has caused project delays and shifts in consumption to other regions, impacting operations and revenue in the affected areas.
China Market Headwinds: Persistent headwinds in China, which represents approximately 2% of ARR, continue to pose challenges, although the impact is mitigated by strength in other regions.
Resource Constraints in Engineering Talent: A shrinking talent pool of infrastructure engineers limits the ability of design firms to pursue new projects, despite high demand and record backlogs.
Economic Model Challenges: The prevalent hourly billing model in infrastructure engineering discourages productivity improvements, as increased efficiency does not translate to higher design billings.
Currency Exchange Rate Fluctuations: Strengthening of the U.S. dollar relative to other currencies has negatively impacted revenues, with a $2 million reduction in Q1 and potential further impacts if current rates persist.
Timing of Operating Expenses: Operating expenses are more weighted towards the first half of the year, creating timing challenges for profitability and cash flow comparisons.
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Guidance & Outlook
AI-driven growth: AI is expected to incrementally contribute to growth through agentic API consumption of modeling and simulation functionality, optimization of designs, and digital twins for operations and maintenance. Asset Analytics, driven by AI, has already exceeded $50 million in annual revenue run rate.
AI initiatives: The company is prioritizing the development of APIs and MCP servers to enable AI-driven workflows. A new MCP server for STAAD has been released, allowing AI agents to optimize structural designs at machine speed. Further instrumentation of key applications and validation of commercial models are planned.
ARR growth: Year-over-year ARR growth for Q1 was 11.5%, with expectations for stable organic growth rates throughout 2026.
Sector growth: Resources sector is expected to continue as the fastest-growing sector, driven by improving mining fundamentals and increased focus on critical minerals. Public Works Utilities sector is supported by robust global infrastructure investments.
Geographic performance: EMEA is the fastest-growing region, with strong performance in the U.K. and Africa. Asia Pacific shows solid growth, led by India and Australia, despite headwinds in China.
Seequent expansion: Seequent's ARR in civil infrastructure has grown significantly, with further potential for growth as engineering firms adopt ground-informed design approaches. Seequent's technology is also expanding into geothermal energy and groundwater management.
Financial outlook: The company remains comfortable with its 2026 financial outlook, including free cash flow expectations of $500 million to $570 million.
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Shareholder Return Plan
Dividends Paid: $21 million was deployed for dividends during the quarter.
Share Repurchases: $54 million was deployed for share repurchases during the quarter.
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Key Q&A
Q:What does Bentley need to do to bring the proposition of supporting $200,000 more in revenue by spending $10,000 on software closer to reality?
A:Gregory Bentley explained that the path involves API consumption, where AI agents can perform more iterations in the same time, delivering better design quality and accelerating the transformation to fixed pricing. This transformation benefits engineering firms and owner operators, and the AI inflection is expected to speed up this process.
Q:What are the key factors that could push Bentley's constant currency ARR towards the higher end of the range this year?
A:Nicholas Cumins highlighted strong tailwinds in infrastructure and resources, particularly mining. Key factors include continued growth in Bentley Asset Analytics, strong performance in the core business infrastructure, and potentially another programmatic acquisition.
Q:Does Bentley foresee any risks in charging for API consumption compared to other software companies that do not charge for data access?
A:Nicholas Cumins clarified that API consumption involves indirect usage of engineering applications through AI agents. Bentley does not monetize access to data in Bentley Infrastructure Cloud, as the data belongs to the infrastructure organizations. The company is exploring API consumption-based pricing for engineering applications while maintaining user-based pricing for Bentley Infrastructure Cloud.
Q:What feedback has Bentley received from customers regarding AI, and how does it impact TAM and ARPU expansion?
A:Gregory Bentley and Nicholas Cumins noted that customers, especially large infrastructure organizations, are validating the opportunity for indirect usage of applications through AI. AI-driven workflows could expand TAM by removing the cap on the number of engineers and increasing ARPU through deeper multiproduct adoption. However, these are longer-term growth opportunities.
Q:How is Bentley helping customers bridge the gap in transitioning to outcome-based contracting?
A:Gregory Bentley mentioned that Bentley's E365 teams assist accounts in pursuing new business and advocating for optimization approaches. Nicholas Cumins added that Bentley engages in high-level advocacy with governments and the financial sector and provides consulting through its Cohesive services arm to explore commercial model changes.
Q:What are the adoption metrics and importance of Bentley Infrastructure Cloud as a data foundation for AI?
A:Nicholas Cumins explained that Bentley Infrastructure Cloud maps data to a schema, making it queryable and analyzable for AI. Bentley does not use customer data to train its AI unless explicitly directed. The cloud serves as a trusted platform for infrastructure organizations, and its adoption is seen as a prerequisite for leveraging AI capabilities.
Q:What initiatives is Bentley undertaking to apply AI to mission-critical engineering?
A:Nicholas Cumins outlined efforts to deliver AI capabilities within products and instrument applications for AI-driven workflows. Bentley launched a Co-Innovation initiative to explore use cases with customers, focusing on creating MCP servers and APIs for engineering applications. AI capabilities are integrated across Bentley's portfolio, including Bentley Infrastructure Cloud and Bentley Asset Analytics.
Q:Are there any shifts in customer behavior regarding data ownership and AI model training?
A:Nicholas Cumins noted that large infrastructure organizations are leading AI efforts and are increasingly cautious about data ownership. Bentley's principled approach to data stewardship, ensuring customer data is not used without explicit permission, has become a competitive advantage.
Q:What drove the strong constant currency net new ARR growth in Q1, and are there any seasonal or one-time factors?
A:Werner Andre attributed the growth to continued momentum from Seequent and strong performance in mining. While Q1 results put Bentley in a good position for the year, it represents only 20% of ARR opportunities, and the rest of the year will determine overall performance.
Q:What are Bentley's expectations for Seequent's growth and Virtuoso's churn?
A:Nicholas Cumins stated that Seequent's growth is expected to remain consistent with 2025 levels. Virtuoso's growth now includes contributions from existing accounts, which helps retention. While the churn dollar amount has increased due to a higher base, overall retention rates remain stable.
Q:Review of Unclear Management Responses
A:Management avoided providing specific adoption metrics for Bentley Infrastructure Cloud and did not detail the exact investment intensity for AI product development over the next 12 to 18 months. Additionally, while discussing API throughput and performance, the responses lacked clarity on how Bentley ensures optimal performance in complex federated systems.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI center
API consumption
ARR BSY
BSY account
BSY brand
China firm
MCP server
Seequent mining
Seequent resource
User Conference
account infrastructure
automation
billing BSY
billing design
billing ex
billing model
center power
computing
conflict Middle
delay
design billing
design firm
design software
economics
engineering news
enterprise AI
event
ex China
factor
firm design
flagship
ground
modeling simulation
news record
potential Seequent
program
project design
resource sector
success
BSY Transcript
Bentley Systems, Incorporated (BSY) Q1 2026 Earnings Call Transcript
Positive5-7
The earnings call highlights strong revenue growth projections, particularly in subscription and service revenues. The focus on AI and digital twins is promising, with potential for ARR growth and geographic expansion. The Q&A reveals positive sentiment towards AI initiatives and infrastructure cloud adoption. However, some concerns about data usage and management's lack of clarity on certain metrics exist. Overall, the strategic focus on AI, strong financial outlook, and positive analyst sentiment suggest a positive stock movement, but not strong due to minor uncertainties.
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Positive2-26
The earnings call highlights strong financial performance with a 16% increase in adjusted operating income and a 110 basis point margin improvement. AI-driven initiatives and digital twins are positively impacting growth, with strategic investments in these areas. The Q&A session reveals optimism about AI's role in future revenue, despite some uncertainties in monetization timelines. The company's focus on expanding M&A and leveraging AI for strategic growth is well-received. Overall, the sentiment is positive, driven by strong financial metrics and strategic growth initiatives.
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